Retail Sales Growth Slows In December - January 14, 2014

The Commerce Department just moments ago reported that many of the nation's retailers experienced a rather listless month of activity to end the year, with aggregate retail sales up just 0.2% for the month. True, that was a bit better than the consensus gain of 0.1%, but it should also be noted that November's increase, initially estimated at a brisk 0.7%, was pared back to just a 0.4% rise.

Still, much of the weakness was attributable to the auto component. Indeed, if we back car sales out of the mix to get the so-called core rate of retail sales improvement, we learn that such volume expanded by a more-than-decent 0.7% in December. That was up sharply from the 0.1% November gain in the core category.

Looked at only from the auto component, which is backed out given the distorting nature of this high-priced product, we find that such sales fell sharply last month, declining by 1.9%. That pullback followed gains of between 1.0% and 1.9% from September through November. Car sales have been an important prop for the economy and we can only conclude that this was a somewhat aberrant monthly result, perhaps brought on by the harsh early winter weather that may have kept potential car buyers out of many showrooms.

As to other components, sales dipped at furniture, home furnishings, electronics, and appliance dealers, with the latter category off sharply for a second time in as many months.

On the other hand, sales were up nicely at food, beverage, and grocery stores, while they rose at clothing and accessories dealers, perhaps boosted by the early onset of frigid temperatures across much of the nation. Still, sales at department stores fell by 0.7% in the all-important Christmas shopping season. The 0.7% drop in department store sales followed three months of increases in a row. Importantly, non-store retailers, that is the Internet, saw sales jump by 1.4% last month, continuing a trend of notable monthly increases over the past year.

Looking at the report on an overall basis, we conclude that this was a rather ordinary performance. Indeed, even when we take out the auto sector, there were still pockets of weakness, most specifically in the department store arena. This report, meantime, does not alter the current business outlook for the just-ended fourth quarter, when we see GDP growth probably approximating 2.5%, a decent performance, in our view.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.